IT departments can help drive business benefits as banking regulation demands increase

Matthew Finnegan |
June 27, 2013

Unification of siloed regulation projects can cut costs of meeting wave of new rules, says Ovum.

Handing IT departments a larger role in planning regulation strategies can reduce cost and drive business growth by removing siloes in the collation and monitoring of data, according to analysts Ovum.

Banks are having to spend increasing amounts of money in order to meet the growing mass of regulation aimed at creating stability in the sector following the financial crash in 2008. A wide range of new regulations, such as Basel III and MiFID II, have been introduced, and will require ongoing investment from banks as implementation is staggered over the next three or four years.

While there are clear disadvantages in failure to comply with regulations - exhibited in the $1.9 billion fine for HSBC's lack of data monitoring around money laundering, for example - the cost of implementation is in many cases cutting into revenue growth among banks, which are already seeing less income and cutting costs across their business.

According to Daniel Mayo, Ovum's chief analyst for financial service technology, a stronger role for IT departments in planning for meeting new regulations can help lower the costs by bringing together individual siloed projects, reducing the duplication of data across the organisation.

Currently, it is often that case that each individual regulation project is coordinated by a separate department, be it finance dealing with Basel III or compliance leading on AML, and there is often not enough communication between each area of the business, Mayo said.

"What often used to happen is that you would invest in anti-money laundering for example, and then have a separate investment in fraud, but actually 70 to 80 percent of what you are doing is the same," Mayo told ComputerworldUK at the Ovum's Financial Services Technology Forum 2013. "So you need to bring those projects together and have the same platform that allows you to do both."

IT, on the other hand, is well placed to create a more coordinated approach to bringing regulation projects together to share data.

"The problem is that, for example, risk isn't speaking properly with compliance or the front office, whereas IT is working with all of the different functions so is in a good position to say 'we are doing the same thing across these different divisions, let's try and do it in one project rather than two or three'," said Mayo.

"At some point you need someone who has overall control. Part of the problem is that responsibility sits between the compliance function, risk management, finance and ultimately it goes to the chief executive. But you need someone who can coordinate across those areas.

"IT has a strong supporting role because from an operation and implementation perspective they are far closer to the ground in working across an enterprise than any other area."